Are you a Canadian investor in Florida businesses? If you have a stake
in any limited liability partnership businesses (otherwise known as L.L.Ps),
then you could be seeing your annual tax burden rise rather dramatically.
On May 26, 2016, the Canadian Revenue Agency (CRA), made their latest announcement
in the world of Partnership tax treatment for Canadian investment in the
US. The announcement established that for the purpose of income tax law,
L.L.P. and L.L.L.P businesses organized under the laws in the states of
Florida and Delaware would longer be treated as “true partnerships.”
Instead, these entities are now taxable as corporations rather than flow
through partnerships. The announcement did not say anything about similar
businesses in other states, but implied they would be treated the same.
The law essentially brings these two types of partnerships to the same
tax grounds as other limited-liability entities, such as LLCs, which have
been taxed as corporations for many years.
Prior to this ruling, the CRA was doing their due diligence in order to
deal with the abundance of newly formed Florida and Delaware LLP’s.
During the process of figuring out the best tax approach, CRA officials
discovered they were allowing their citizens to receive the preferential
flow through tax treatment for their US investments held in a US LLP.
Instead, Canadian owners of U.S. L.L.P. and L.L.L.P. businesses will not
be subject to double income tax. First, from the United States government,
who will continue to treat these entities as “pass-through”
entities, and only subject them to income taxes, but then again by the
Canadian government who tax these businesses as corporations. Previously,
Canadian citizens could credit the tax they paid to the U.S. towards their
Canadian burden, but this is no longer the case.
The opposite can also be true: U.S. businesses that also have operations
or investments in Canada could be taxed at a higher rate as well.
These changes have caused significant changes and necessary adjustment
for our client’s at Powell, Jackman, Stevens & Ricciardi, PA. Our
Fort Myers business lawyers can assist with providing all of the information necessary to ensure your
US based investment is fully secured and you are receiving all of the
benefits permitted by law.
To learn more about how to hold your Florida based investments,
contact our firm today.